If the trial of Theranos founder and CEO Elizabeth Holmes was a referendum on Silicon Valley’s fake-it-until-you-make-it culture, the mixed verdict should send a strong signal to startups and their advertising teams: When it comes to healthcare, there’s a fine line between hyperbole and public deception.

After a 15-week trial in federal court in San Jose, Holmes was convicted Monday on four of 11 charges. Jurors found that she carried out a yearslong scheme to defraud investors while running Theranos, which promised a novel technology for making blood testing simpler, cheaper and more efficient but ended up as perhaps Silicon Valley’s most infamous meltdown

Theranos shuttered in 2018 after investigations, prompted by the reporting of The Wall Street Journal’s John Carreyrou, proved that the company’s claims were untrue. Holmes and her next-in-command, Ramesh “Sunny” Balwani, were indicted on 12 counts of fraud in 2020; one count was later dropped. Balwani’s trial is scheduled for later this year.

Prosecutors didn’t tie Holmes directly to Theranos’s marketing efforts to attract patients, and she was acquitted on several counts related to charges that her firm deceived patients who relied on the company to deliver accurate blood test results. The jury reached an impasse on three other accusations related to transfers of funds from investors. 

But the jury mostly found against her on charges that she fed investors a steady stream of fabricated claims about the firm’s technology. She was convicted on three fraud charges and one conspiracy to defraud charge.

It’s been said that the Theranos saga won’t have too chilling an effect on the venture investment community’s penchant for buying into entrepreneurs’ often lofty projections. For one, there’s too much capital chasing too few deals. Moreover, in the world of high-tech investing, many hyped ideas are far from proven. Evangelizing the next Uber or Zillow is just part of the game. 

What’s to prevent that culture from giving rise to another Theranos? Holmes’ misleading sales pitches falsely claimed the firm’s devices were being used by the military and that the company was on track to make nearly $1 billion annually in 2015. 

The assertions may seem outrageous in hindsight, but keep in mind that in 2013 and 2014, Holmes had a good idea to improve healthcare, a compelling personal story and impressive supporters. Investors valued Theranos at $9 billion. Journalists from Business Insider, Fortune and Forbes took her at her word. 

In the end, it was Theranos’s own employees who ended up poking holes in the technology. The buck should have stopped much sooner than it did. For instance, Theranos’ technology had never appeared in peer-reviewed biomedical literature

No matter how charismatic the founder, or how stealthy the research, medical claims need to be properly vetted. In healthcare, where the line between puffery and outright deception is finer than in other industries, that entails rigorous, scientific proof. 

To find out what else healthcare marketers should take away from this week’s split verdict against Holmes, MM+M spoke with Stan Fiorito, who was a group account director at TBWA\Chiat\Day when Theranos hired the ad agency. Fiorito’s experience, which was recounted in the ABC News documentary The Dropout, contains some valuable lessons.

(The following interview has been lightly edited and condensed.)

MM+M: After a decade with TBWA\Chiat\Day, you left in 2016 and are now chief marketing officer of TerraCotta Group, a private investment firm specializing in commercial real estate credit. Did you consider working with a healthcare client again?

Fiorito: I had never worked with a healthcare client until Theranos and haven’t worked with one since.

MM+M: Is this because of that experience, perhaps?

Fiorito: Not particularly. In the agency world, a lot of firms are highly specialized. There are groups that are dedicated to healthcare marketing. I’ve done health and wellness, but not healthcare or medical. 

MM+M: As healthcare becomes more consumer-facing, marketing work is often handled by mainstream ad agencies. In 2013 and 2014, this wasn’t necessarily as common. Did Holmes ever consider a medical marketing shop or was she pretty set on TBWA\Chiat\Day? 

Fiorito: She really wanted to come to us given the track record at TBWA\Chiat\Day – obviously a well known agency within Silicon Valley – with past clients like Apple. They saw themselves, as we all know, as a transformational company and were looking for an agency that helped with that, not your typical medical-oriented agency. 

MM+M: And so it was that TBWA/Chiat/Day was hired by Theranos circa 2012-2013, on an $11 million retainer, to develop an ad campaign for their blood-testing devices. That was quite a bit to spend on marketing.

Fiorito: We were asked to do a whole host of marketing duties, not just consumer-facing advertising. We were asked to help build a website, a mobile phone app and in-store materials. We were asked to come up with B2B or doctor-related marketing materials, both in terms of recruiting doctors and giving doctors the ability to promote the product within their practice. It was a real laundry list of different marketing activities and initiatives that we were working on. Generally you work on a billable hour. So it was very expensive, given the amount of work we were asked to do and the seniority of the people involved. 

MM+M: TBWA\Chiat\Day had done Apple’s iconic 1984 Super Bowl ad, the “Think Different” campaign and the Mac-versus-PC ads. How did you view Theranos in terms of your mission to promote disruptive tech companies?

Fiorito: We really believed that the proposition was groundbreaking when we first were exposed to it. I was personally excited about the transformative and disruptive nature of it. Along with that was the idea that maybe Silicon Valley had finally found a female leader besides [former eBay CEO] Meg Whitman. 

The agency’s philosophy, as set by TBWA\Chiat\Day chairman Jean-marie Dru, was a disruptive one. We looked to work with disruptive companies and companies liked to work with Chiat/Day to disrupt their marketplace. 

Theranos seemed like a really good fit. We were excited to help them promote this new and exciting way to help people. The promise down the line was that, given how inexpensive it was purported to be, and hopefully readily available through organizations like Safeway and Walgreens, that you could essentially get a blood test yourself without a doctor’s order. Helping a person measure against their own norms could be preventative. 

Elizabeth Holmes
Source: Getty Images.

MM+M: Holmes’s defense argued, in effect, that the misinformation with which she plied investors was characteristic of tech industry exaggeration and that investors were experienced enough to interpret her projections as uncertain, not fraudulent. What has the Theranos episode taught us about the line between hyperbole and responsible marketing? 

Fiorito: That’s a heady question. I’ve had the opportunity to work with a dozen startups at different stages. All of them were created with a product, one which was functioning and which you could touch, feel and experience. Some of them won, some of them failed. And not because there wasn’t a product that was trying to meet a consumer need, but sometimes it was funding, distribution or the pricing of the product. Sometimes it was adoption. All of those factors are really key in getting startups off the ground. 

The problem with this one was that, after the initial meeting I had with them in 2012, I never saw the “black box” [the Theranos proprietary-testing device] again, which resembled the Apple Next computer. [By exploiting a legal loophole, Theranos was actually taking back the blood samples to its lab to be run on conventional lab machines. -ed.] The idea that they were taking traditional blood draws through vacu-containers and then trying to ship them over through FedEx scared the shit out of us. 

So the lesson there is, “Where’s the product and the product testing? Where is the due diligence on viability in terms of distribution, scale, peer review, and then medical review from the likes of the FDA?” Those things weren’t met, and I’m not even talking about the investor due diligence.

MM+M: In the documentary, you talked about verifying all of Theranos’s assertions before allowing the ads to go live. So here were the ad guys, not just Theranos’s own employees, poking holes in the firm’s story and holding them accountable. At one point, you told Holmes that she had to amend copy with regard to unproven claims and reduce those to vague statements. It struck me that, had it not been for those checks and balances, a lot more damage could have been done. Can you give an example?

Fiorito: The big one, which stems from the first time I met her – a year before we even started a contract – with board member [and former Secretary of Defense] James Mattis. And everything she said that day and that day forward was that it was used by the Department of Defense in the field. At the end of the day, we had website copy and collateral copy using that as a claim. And I forgave it because, hey, I’m an ad guy. I’ve been through this. Is anybody from the DOD ever going to let you use the DOD as an endorsement? Of course not. 

So when they said, “No, we can’t use that.” I of course chalked it up to, “Well, yeah, it’s the DOD. The DOD is never going to come out and endorse anything.” So that was a critical component to the farce that was created.

And then subsequently, as marketers, we do not accept liability. We have to have the advertiser accept that liability. It’s a pretty known practice that’s been in place for decades. It had to be substantiated through studies and through their legal team before we were going to put anything in print. Those checks and balances are really important. And those are not emotional. It doesn’t matter whether you like or don’t like a client. Those are just the rules of the road.

MM+M: Some had pointed out that this won’t change the culture in Silicon Valley, that investors know hyperbolic projections are all part of the game and that they’ll still allow themselves to be wowed by the next confidence scheme wrapped in an entrepreneurial package. How important is it for marketers to have their antenna up, to be that backstop? 

Fiorito: I don’t think it will change. I want entrepreneurship and innovation to work and I want people to continue to meet consumers’ needs. What we’re specifically talking about is a medical device or a medical proposition. That needs a deeper level of regulation. 

The other thing is, these startups are less and less in need of a big agency. Much of building audience and consumer demand is through owned social channels. So there’s less of a need for a partner. That might be scary because there is less of a chance for checks and balances by an outside agent, if you will, to help steer a brand. 

MM+M: What parts of your work saw the light of day?

Fiorito: The website and app were created. The ads were all done on spec; nothing was ever in publication. We did a lot of mockups for board meetings. The only thing public was in-store and the website, and some materials that went to doctors. 

MM+M: As your former agency colleague Mike Peditto put it in The Dropout, when TBWA\Chiat\Day landed the Theranos account, a lot of people raised their hands for it. That underscores how much everyone believed in the type of work Holmes purported to be doing. What’s the legacy of the Theranos case for agency people?

Fiorito: Continue to be curious and ask questions as to whether you believe in the product. And then you have to make sure that you use it, you believe in it and you can sell it honestly with hand on heart. And if you can’t do that, ask why.